Illicit financial flows (IFFs) of various kinds, and the role of tax havens in facilitating these flows, have come under increased scrutiny since the global financial crisis of 2007-2009. A series of high-profile scandals and leaks of sensitive information about how corporates and individuals organise their financial affairs to escape their social obligations have contributed to this interest.

This report explores the relevance of these for South Africa. It looks at definitions and basic mechanisms, and provides an overview of methodologies used to estimate IFFs. It presents a set of case studies that illustrate how these mechanisms operate in practice, and provides an indication of the scale of IFFs and which tax havens play a significant role in facilitating these. It then explores the channels through which IFFs and tax havens affect industrial development, and makes the case for an active role for industrial policy in protecting South Africa’s industrial base from IFF and tax haven exposure, setting out a  number interventions that the Department of Trade, Industry and Competition and other government agencies may develop to reduce the impact on industry in South Africa, accompanied by research proposals aimed at enhancing such efforts.

Download Policy Brief: Illicit financial flows and industrial development in South Africa: A discussion of policy options

Marleny Arnoldi, Engineering News. 3 November 2020: Financing instruments need to be overhauled for a successful just transition

Background

Business Day - 26 October 2020 by Neva Makgetla (TIPS Senior Economist)

Read online at Business Day.

Or read as a PDF.

Africa Logistics -  October 2020 

Read online at Africa Logistics.

Richard Halsey - Project90by2030

Presentation: Remaking our energy future

Report: Remaking Our Energy Future: Towards a Just Energy Transition (JET) in South Africa

Nthabiseng Mohlakoana - Centre for Complex Systems in Transition 

Presentation: Unravelling South Africa's Just Transition: Unpacking the energy-level impacts

Dominic Brown - Economic Justice Programme, Alternative Information and Development Centre

Presentation: Why only the public can save us

Report: Eskom Transformed - Achieving a Just Energy Transition for South Africa

Angelo Coppola, AfricaLive on CGTN Africa. 19 November 2020. Interview with Gaylor Montmasson-Clair at 37.17: https://youtu.be/VRm0uJQ0Tug

Lameez Omarjee, Fin24. 18 November 2020: Eskom plans for coal-fired plant closures as it eyes zero emissions 

Terence Creamer, Engineering News. 17 November 2020: Eskom moves to finalise just energy transition framework as shutdown of grootblei and hendrina draws near 

Background

South Africa, a carbon-intensive economy, has initiated a transition to a more sustainable development pathway. While this is an economy-wide transformation, the transformation of the electricity supply industry (ESI) is at the centre of this shift. In a highly unequal society like South Africa, the need for a just transition, which would empower vulnerable stakeholders, has emerged as an imperative. This has implications for the workers, businesses and communities relying, for their livelihood, on the existing and/or transformed ESI. It also has critical implications in terms of access to energy from households and other customers. 

This dialogue aims to inform this just transition process. It explores the ground-level impacts associated with a just transition away from coal. It builds on two previous dialogues hosted on 7 July, 29 September and 3 November.

About the Speakers

Mandy Rambharos is the Head of Eskom’s newly-established Just Energy Transition office. She was previously the utility’s Head of Climate Change and Sustainable Development and has been involved in sustainability issues for more than a decade. Mandy will present on the results from Eskom’s socio-economic impact studies and the utility’s work on developing a Just Energy Transition Roadmap.

Richard Halsey is a researcher at environmental non-governmental organisation Project90by2030. He co-ordinates the Electricity Governance South Africa network, a grouping of civil society organisations dedicated to promoting transparent, inclusive and accountable decision-making in the energy sector. Richard will present on Remaking Our Energy Future: Towards a Just Energy Transition in South Africa.
 
Nthabiseng Mohlakoana is a researcher and lecturer at the Centre for Complex Systems in Transition at the University of Stellenbosch. She has over 15 years of experience in research focusing on energy policy implementation, energy access and use as well as gender mainstreaming in the energy sector. Nthabiseng will present on the interplay between energy access issues and just transition in South Africa.
 
Dominic Brown is the Coordinator of the Economic Justice Programme at the Alternative Information and Development Centre, an activist think-tank supporting worker struggles and social movements for economic, social, and environmental justice. He focuses on political economy research and facilitates popular education and trainings with social movements and trade unions. Dominic will present on Eskom Transformed: Achieving a Just Energy Transition for South Africa.

About the Facilitator

Gaylor Montmasson-Clair is a Senior Economist at TIPS, where he leads work on Sustainable Growth. He has carried out extensive research on the transition to an inclusive green economy from a developing country perspective, with a focus on policy frameworks, industrial development, just transition and resource security.

This webinar builds on a three earlier dialogues, hosted on 7 July, 29 September and 3 November.

The National Climate Change Response White Paper requires the development of Sector Jobs Resilience Plans (SJRPs). These plans aim to protect vulnerable groups that may lose their jobs or livelihoods as a result of climate change impacts, related either to physical effects or to the transition to alternatives.The proposals for the SJRPs, and the evidence supporting them, are presented as a suite of related documents. These are a main report:  National Employment Vulnerability Assessment: Analysis of potential climate-change related impacts and vulnerable groups; the SJRP Toolbox: Summary for policy makers; and proposals for five value chains that seem particularly likely to be affected: coal, metals, petroleum-based transport, agriculture and tourism.

National Employment Vulnerability Assessment: Analysis of potential climate-change related impacts and vulnerable groups

The SJRP Toolbox: Summary for policy makers

Sector Jobs Resilience Plan: Coal value chain

Sector Jobs Resilience Plan: Metals value chain

Sector Jobs Resilience Plan: Petroleum-based transport value chain

Sector Jobs Resilience Plan: Agriculture value chain

Sector Jobs Resilience Plan: Tourism value chain

The research for this project was conducted by Trade & Industrial Policy Strategies (TIPS) for the Departments of Environment, Forestry and Fisheries and Trade Industry, and funded by GIZ.

TIPS research team: Neva Makgetla, Nokwanda Maseko, Gaylor Montmasson-Clair and Muhammed Patel.

Exports to China have fluctuated between 9% and 12% of South Africa’s exports between 2010 and 2020. South Africa’s main exports to China comprise metal products. China is the largest emitter of greenhouse gas (GHG), for both production and consumption. This stems mainly from coal-based electricity generation and mining. While both China’s domestic and foreign policies depict a leniency towards coal-fired power generation, the country is a leading global investor in renewable energy production both domestically and abroad. At the centre of China’s climate change regulation is the issuance and monitoring of energy efficiency standards, particularly for cars.

This brief is based on a comprehensive review of China’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.

South Africa’s top exports to India are coal, manganese, chemical wood pulp, platinum and spark-ignition engines. India is a key export partner of South Africa, accounting for 5% of exports over the 2010 to 2019 period. India’s transition towards increased consumption of domestic thermal coal and reduced thermal coal imports, combined with investments into additional renewable energy capacity, place South African coal exports at significant risk. India is a significant importer of South African coal, accounting for 53% of South African coal exports in 2019.

This brief is based on a comprehensive review of India’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.

Exports to Japan accounted for 5% of South Africa’s exports between 2010 and 2019. Production processes in Japan have been characterised by high fossil fuel use, especially following the Fukushima nuclear accident which saw nuclear power being substituted by fossil fuels. Japan’s climate change mitigation is centered on carbon capture technologies, increasing energy efficiency, and the introduction of new technologies such as hydrogen. In 2016, Japan also enforced a carbon tax on oil, gas and coal imports, and on consumption. This has, however, been inconsequential to its trading relations with South Africa.

This brief is based on a comprehensive review of Japan’s climate change policy framework in relation to industries, as well as a review of South Africa’s climate and trade risks. It forms part of a research project for the Department of Trade, Industry and Competition examining the vulnerability of South African trade to evolving climate change legislation. The research comprises a main report on The global climate change regime and its impacts on South Africa's trade and competitiveness: A data note on South Africa's exports; case studies on various sectors; detailed briefs that explore South Africa’s trade risks with different countries; and key data in Excel format.

The reports, other country briefs and excel sheets are available at Climate change and trade risks.